Correlation Between Gold Resource and Franco Nevada

Can any of the company-specific risk be diversified away by investing in both Gold Resource and Franco Nevada at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gold Resource and Franco Nevada into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gold Resource and Franco Nevada, you can compare the effects of market volatilities on Gold Resource and Franco Nevada and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Gold Resource with a short position of Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Resource and Franco Nevada.

Diversification Opportunities for Gold Resource and Franco Nevada

0.18

Correlation Coefficient

Gold Resource  Franco Nevada

Average diversification

The 3 months correlation between Gold and Franco is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Gold Resource and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Gold Resource is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Gold Resource are associated (or correlated) with Franco Nevada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franco Nevada has no effect on the direction of Gold Resource i.e., Gold Resource and Franco Nevada go up and down completely randomly.

Pair Corralation between Gold Resource and Franco Nevada

Given the investment horizon of 90 days Gold Resource is expected to generate 3.62 times more return on investment than Franco Nevada. However, Gold Resource is 3.62 times more volatile than Franco Nevada. It trades about 0.17 of its potential returns per unit of risk. Franco Nevada is currently generating about 0.11 per unit of risk. If you would invest  15.00  in Gold Resource on September 12, 2024 and sell it today you would earn a total of  3.00  from holding Gold Resource or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Gold Resource  vs.  Franco Nevada

Gold Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Resource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Franco Nevada

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Franco Nevada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Franco Nevada is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Gold Resource and Franco Nevada

The main advantage of trading using opposite Gold Resource and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Resource position performs unexpectedly, Franco Nevada can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Franco Nevada will offset losses from the drop in Franco Nevada's long position.

The idea behind Gold Resource and Franco Nevada pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.